Category Archives: Free Courses

Austrian Investing in a Distorted World

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Investors and Austrian Economics

Mises Daily: Friday, July 04, 2014 by 

Robert Blumen, a software engineer with a background in financial applications, recently spoke with the Mises Institute about the Austrian School’s growing influence among investors.

Mises Institute: In recent years, we’ve seen more and more Austrian-tinged economic analysis coming from investors like Mark Spitznagel and Jim Rogers, to just name two. As someone personally involved in the investment world, have you yourself seen growth in Austrian ideas among investors and similar professionals?

Robert Blumen: There has been tremendous growth in interest in Austrian economics among financial professionals. I started an interest group for Austrians in Finance on LinkedIn which, in a few years, has grown to almost 2,000 members from the US, South America, East, Southern, and Central Asia, Africa, and Eastern and Western Europe. Peter Schiff appears regularly on financial shows. The Mises Institute drew hundreds of people from the investment world to an event in Manhattan.

Since 2002, a number of Austrian-themed books in financial economics have come out. Alongside titles from established writers such as James Grant, there is Detlev Schlichter’s Paper Money Collapse, and several books by Peter Schiff. There are many popular Austrian bloggers such as Grant Smith and Robert Wenzel. Over two million viewers watched a 2006 video in which a parade of condescending media hosts heap ridicule on Peter Schiff, who, to his credit, did not back down in the face of their smugness.

MI: Did the financial crisis of 2008 help increase the sympathy for Austrian economics?

RB: I have heard the same story from many people in finance. When the bust of 2000 (or 2008) happened, it did not fit what they had been taught in school, nor could it be explained within the belief systems of their colleagues in financial markets. Their next step was reading, searching for answers, and then, finding the writings of Mises, Hayek, or Rothbard that enabled them to make sense of what had happened.

To answer your question, yes, I think that the failure of the popular economic theories — evidenced by these inexplicable crises — has driven the search for superior ideas. The Mises Institute has been publishing for years, explaining these boom and bust cycles with Austrian economics. When people searched, many of them ended up at mises.org.

MI: In spite of lackluster growth on Main Street, Wall Street appears quite happy with growth over the past two years. For the casual observer, one might argue that the Fed has managed things well. What do you see as problematic with the current approach, and are there some in the finance world skeptical of the Fed’s current strategy?

RB: The Fed has a series of mistaken theories supporting their belief that higher stock prices indicate the success of their policies.

The first is the thinking that asset prices are actual wealth, when they are only the prices of the capital goods, which are a form of real wealth. Asset prices, in real terms, are the exchange ratios between consumption goods and capital goods. Artificially-boosted asset prices mean only that the owners of assets who bought them at lower prices have increased their consumption possibilities in relation to non-owners of assets. The owners of most assets, the so-called “1 percent” are the beneficiaries of Fed policies.

There is no systemic economic benefit to any particular value for stock prices. Young people saving for the future and entrepreneurs who are looking to pick up capital goods at bargain prices would find lower stock prices give them a better deal. This is the same as for any good.

Their second error is that higher stock prices create a “wealth effect,” in which people see their asset values rise, feel richer, and consequently save less and spend more. Their goal is to boost consumption through pumping up asset prices. As Keynesians, they are all in favor of this because they think that consumption drives production.

Sound economic thought has recognized, at least since the classical school, that production must precede consumption, and that production drives demand, not the other way around. The Fed understands none of this because they have no understanding of the purpose of capital goods in the production process, which is to increase the productivity of labor.

 A one page summary of ABCT: http://www.auburn.edu/~garriro/a1abc.htm

Courses on Austrian Business Cycle Theory: http://kristinandcory.com/Austrian_Business_Cycle_Theory_1.html  (Watch the first seven-minute video of Tom Woods for a quick synopsis. Common sense?)

Wreckage_Austrian_Business_Cycle_Theory_by_Aguilar (An attack upon the Austrian theory)  You always seek out the opposing view to test the logic, facts and theory behind the other view.

Misconceptions about Austrian Business Cycle Theory

They believe this about home prices as well, which is arguably an even greater fallacy because homes are consumption goods. A rising standard of living means that we are able to buy consumption goods at lower real prices over time, not higher.

And finally, they see the stock market as a sort of public referendum on their policies. They point to the stock market and say, “see, the market approves of what we are doing.” But when you realize that through its monetary expansion, the Fed itself is responsible for the rising stock market, that calls into question whether we can use it as independent measure of public opinion, or instead, the Fed voting for itself with money that it prints.

Austrian-informed financial thinkers understand this. There are hundreds of Austrian-oriented blogs and commentary sites, as well as some excellent heterodox sites with a very Austrian-friendly perspective such as Zero Hedge, Jim Rickards, Marc Faber, and Fofoa.

MI: We’ve mostly been talking about the US so far, but speaking globally, do you see any areas that are of particular concern, such as China or the Euro zone?

RB: Credit allocation in China is not market-based. They import the Fed’s inflation through their currency peg, which diverts dollars into their sovereign wealth fund where it is “invested” by bureaucrats in various forms of dollar-zone assets. Their domestic savings go into their banking system, where it is wasted on politically-favored projects due to non-market allocation of bank credit. The entire system is experiencing a series of bubbles in real estate and other sectors.

Their rate of infrastructure spending for comparably developed economies is about twice as high as normal. This is because the communist party officials are under great pressure to hit GDP targets — as if prosperity could be spent into existence by hitting a number. Infrastructure such as roads and empty cities present an opportunity to spend a large amount of money, all in one place, on a lot of Very Big Stuff, which under market-based economic calculation would be revealed as wasteful.

The problems in Europe are a combination of the massive debts that can never be paid back, the unfunded entitlements, and the growth in the burden on producers, a theme that I addressed in my recent Mises Daily article on Say’s law. This burden consists of the totality of regulation, taxation, inflexible prices and labor markets, and the threat to the confiscation of wealth. If you project these trends into the near future, I’m not sure where the lines cross, but the system is clearly unsustainable in its present form because it relies on sustaining current levels of consumption as fewer and fewer people produce.

Free Seminar in NY on The Future of Money

The Future of Money: Bitcoin, the Gold Standard, and Free Banking
 
With the rise of Bitcoin and the continuing discussion of the gold standard as solutions to our current monetary woes, the Sound Money Project of the Atlas Network is organizing a reception and panel discussion on alternatives to the current monetary system. 
IS Bitcoin money?  Bitcoin-CMRE
 
Location:
Penn Club of New York
30 W 44th Street
New York, NY 10036
Time:
Tuesday, June 3, 2014
from 6:00 PM to 8:00 PM (EDT)
 
Speakers:
Daniel Oliver, Committee for Monetary Research & Education
Lawrence H. White, George Mason University 
A representative from the Bitcoin Embassy, Canada 
 
Moderator: Gonzalo Schwarz (Atlas Network)
 
Heavy hors d’oeuvres and drinks will be served. The first 50 attendees to arrive will receive a copy of Notes on the Establishment of a Money Unit by Thomas Jefferson and with a forward by Atlas Senior Fellow Judy Shelton. 
 
For more information contact Brittany Cobb at Brittany.Cobb@AtlasNetwork.org or (973) 826-2003.
 

Dan Oliver graduated from Columbia Law School with honors in 2001 and practiced law at Simpson Thacher & Bartlett. He left Simpson Thacher to obtain an MBA from INSEAD in 2005. After co-founding two venture compnaies, Mr. Oliver joined Bearing Capital, LLC, a private equity firm in Buenos Aires focused on Latin American commodities investments. Mr. Oliver founded Myrmikan Capital in 2009, an investment firm specializing in micro- capitalized gold mining companies. Mr. Oliver is currently a Director of the Committee for Monetary Research & Education and a National Review Institute Fellow. 
 
Lawrence H. White is Professor of Economics at George Mason University. He specializes in the theory and history of banking and money, and is best known for his work on free banking. He received his A.B. from Harvard and his M. A. and Ph.D. from the University of California, Los Angeles. He previously taught at New York University, the University of Georgia, and the University of Missouri – St. Louis.
In 2008 White received the Distinguished Scholar Award of the Association for Private Enterprise Education. He has been Visiting Professor at Queen’s University Belfast, Visiting Fellow at the Australian National University, Visiting Research Fellow and lecturer at the American Institute for Economic Research, visiting lecturer at the Swiss National Bank, and a visiting scholar at the Federal Reserve Bank of Atlanta. He co- edits a book series for Routledge, Foundations of the Market Economy. He is a co-editor of Econ Journal Watch, and hosts bi-monthly podcasts for EJW Audio. He is a member of the board of associate editors of the Review of Austrian Economics and a member of the editorial board of the Cato Journal. He is a contributing editor to the Foundation for Economic Education’s magazine The Freeman and lectures at the Foundation’s annual seminar in Advanced Austrian Economics. He is an adjunct scholar of the Cato Institute and a member of the Academic Advisory Council of the Institute of Economic Affairs.
Gonzalo Schwarz (moderator) manages the Awards and Grants program at the Atlas Network that include the prestigious Fisher Memorial Award and Templeton Freedom Awards.  Additionally he manages the Latin American Program. He currently holds an MA in Economics from George Mason University and is looking to pursue other graduate studies. He is originally from Uruguay and has lived in four other countries throughout his life. In the past he worked in academics and other non profits. He enjoys participating in academic seminars and was also part of the Koch Foundation Fall internship in 2009. His main hobbies are sports, reading and spending time with his family.
Have questions about The Future of Money: Bitcoin, the Gold Standard, and Free Banking? Contact Atlas Network
READING

A Fourteen Year-Old Reader Asks, “How to Start?”; Worldly Wisdom

ANSWERS

 

Education is the ability to listen to almost anything without losing your temper or your self-confidence. –Robert Frost

My idea of education is to unsettle the minds of the young and inflame their intellects.  –Robert M. Hitchins

My own education operated by a succession of eye-openers each invovling the repudiation of some previously held belief. –George Bernard Shaw

Every act of conscious learning requires the willingness to suffer an injury to one’s self-esteem. That is why young children, before they are aware of their own self-importance, learn so easily; and why older persons, especially if vain or important, cannot learn at all. –Thomas Szasz   (www.gloomboomdoom.com)

A Young Reader’s Question

How do I become a great investor?

CSInvesting: Well, it might be too late for you. I started at age eight, and I struggle to keep the pace. :) However, if you still wish to learn, read widely and experience life. Start a small business. Sell T-shirts or think of a fun business where you can sell products to your classmates.

My grandfather’s advice: “John, that’s your name right?” http://youtu.be/AloNERbBXcc

Buffett’s lecture to Indian business students (MUST SEE): http://youtu.be/4xinbuOPt7c   (Value the business BEFORE you see the price.)

A Course in Charlie Munger’s Worldly Wisdom

The journey towards worldly wisdom travels through two equally important territories. Firstly, learning significant concepts from the different disciplines (“the big ideas”). Secondly, learning to recognize patterns of similarities among them.

Worldly-Wisdom-by-Munger

Academic Economics_MungerUCSBspeech

Course Outline for Worldly Wisdom

Lecture_1

Lecture_2

Lecture_3

Track down more lectures: http://www.safalniveshak.com/fundoo-professor-called-sanjay-bakshi/

HAVE A GREAT WEEKEND!

The Monetary Polaris or Back to the Future (Free Book)

Monetary Polaris Book Cover

220px-Gold_Bars

 

 

 

 

Free Book: Gold, the Monetary Polaris  by Nathan Lewis 

I highly recommend this book to understand our current mess and how we can go back to stable money and a prosperous world for all.  Before dismissing the idea of a gold standard with thoughts of–there is not enough gold; we tried that before and why gold, we now have Bitcoin–learn first how a gold standard works and then financial and monetary history. Your study will pay huge dividends.  Lewis debunks the myth that you need 100% gold-backing for paper money. (See Rothbard’s book, Case for a 100 Percent Gold Dollar)

For a great romp through financial history and the role that gold played: Gold as money Lewis  Another great book.

Lewis writes on page 5, “A gold standard system has a specific purpose: to achieve, as closely as is possible in an imperfect world, the Classical ideal of a currency that is stable in value, neutral, free of government manipulation, precise in its definition, and which can serve as a universal standard of value, in much the manner in which kilograms or meters serve as standards of weights and measures.”

The author shows how and why the Classical principle of stable, gold-based money once made Americans wealthy. Why not now?

Stable money along with clear property rights/rule of law and low taxation/regulatory burdens have provided the means for the greatest human prosperity.

View Nathan Lewis’ articles here: www.newworldeconomics.com

Video Lecture published on Feb 18, 2014: Http://Www.Cato.Org/Events/Gold-Monet…

In this sequel to Gold: the Once and Future Money, Nathan Lewis describes the theoretical basis of gold-standard monetary systems. Lewis argues that the pre-1913 world gold standard system was perhaps the most successful monetary system the world has ever seen, enabling high levels of economic growth. Descriptions of both Britain’s economic rise under the gold standard and the United States’ rise to economic prominence under gold are also discussed.

Part 2: Analyzing a Gold Mining Company–Initial Steps

Mark Twain: “A mine is a hole in the ground with a liar standing next to it.” 
2-BGMI-Gold both-W2 (1)

Initial Steps

We first have to understand the product/market of our gold company. Gold companies produce gold and silver which is money. What is money?  Precious metals have exchange value which makes up a large part of their value.  You first have to understand the gold market. Note: why did gold go down LESS than other commodities such as oil in the 2008/2009 credit crisis?

You need to draw up an industry map. How? Find out who the participants are.

Start with history: http://www.fgmr.com/gold-mining-stocks-have-outperformed-the-djia.html

BGMI http://www.sharelynx.com/chartstemp/free/fchart-BGMI.php

QUIZ: What is the best environment to invest in Gold mining equities. Why?

We will circle back to an industry map after you have read about the industry.

What determines the price of gold: http://www.acting-man.com/?p=10251 Also, do a search for gold and/or mining stocks and then read his posts.

The Case For Gold by R Paul

Gold Dollar by Rothbard

Roubini Why Gold Won’t work

Study: www.monetary-metals.com

Gold as collateral: http://www.alhambrapartners.com/2014/02/26/gold-and-reverse-repos/   Also, do a search for gold.

Read free research on gold as money: http://www.myrmikan.com/port/

View all five videos on money: http://hiddensecretsofmoney.com/

Two excellent books: Gold, the Once and Future Money by Nathan Lewis. Also, Gold: The Monetary Polaris by Nathan Lewis.

Gold and inflation: http://www.garynorth.com/public/department32.cfm

The case for gold:  http://www1.realclearmarkets.com/2011/11/18/my_thoughts_on_lewis_lehrman039s_gold_standard_120618.html

Understand royalty companies: http://seekingalpha.com/article/1341411-gold-and-silver-royalty-companies-part-1-the-pros-and-cons-of-royalty-companies   (read all five parts)

Then read presentations of Royal Gold, Silver Wheaton, Franco-Nevada, Sandstrom from their websites for a good overview of the gold mining market(s).

These sites can get you started. Don’t believe the hype!

www.goldsilverdata.com Also, go to http://youtu.be/VjjLhPqO8bY to view video on valuing gold and silver stocks.

Go to www.youtube.com and search for Jim Grant AND gold,   John Doody and mining stocks.  Ditto for Brent Cook, Rick Rule. Search for their comments.

That will get you started and then next week, I will post an industry map. Ask questions.   In two weeks we will crack a company.

Update March 17, 2014: Discussion of Junior Resource Sector

Gold1800to2000

 

Detecting Fraud: Seminar on Reading 10Ks, 10Qs and More

money-and-magnifying-glass-by-Images_of_Money-cropped

The free webinar, “SEC Filings Master Class,” took place Nov. 13-15, 2012.

Michelle Leder, who makes her living unearthing news in SEC filings, will help you feel more confident in your SEC-document sleuthing. In three one-hour sessions, you’ll enhance your ability to spot red flags in SEC filings.

WHAT YOU WILL LEARN

  • At least four things to look for in Form 10Ks that can result in good stories
  • At least four things to look for in proxies that can result in good stories
  • At least four things to look for in Form 10Qs that can result in good stories

AGENDA

For each of the documents below, Leder will point out at least four key things to watch for that can produce good stories. She’ll offer examples of stories that have been done, point out where to find these types of stories in the fine print of the SEC document and offer attendees a chance to practice finding the news themselves.

  •  Hour One: Form 10-K, or the annual summary of the company’s performance, is filed within 60 days of the end of its fiscal year.
  • Hour Two: Proxy, or Schedule 14A, provides information to shareholders before the annual meeting. It includes executives’ compensation.
  • Hour Three: Form 10-Q, or the quarterly summary of the company’s performance, is filed within 35 days of the end of each of its first three fiscal quarters. This session will also touch on other key filings.

YOUR INSTRUCTOR

Michelle Leder launched Footnoted.com (originally Footnoted.org) in 2003 to take “a closer look at the things that companies try to bury in their routine SEC filings,” according to the website. Its launch coincided with the release of her book, Financial Fine Print: Uncovering a Company’s True Value. Morningstar bought the site in 2010, but Leder bought it back in 2012.

What do you think?

SELF-GUIDED LESSON

Check out the resources below. At your own pace, you can walk through the self-guided lesson on tips for digging deeper into SEC filings.

http://businessjournalism.org/2012/11/12/sec-filings-master-class-self-guided-training/

LINKS

AK Rifles

“You can’t build lasting stock market gains or solid GDP growth on debt. Because debt cannot expand forever. Sooner or later it must stabilize and then it must contract. When that happens, all the positive features of debt become negative features. Instead of borrowing and spending more, people must spend less and pay off past debt. Instead of adding to corporate sales and profits, they subtract from them. Instead of driving up asset prices, they push them down.”

Borrowed money has an almost magical effect on the way up. It comes out of nowhere. So there is no labor cost to offset against it. It goes almost directly into corporate profits. http://www.rickackerman.com/2011/06/a-gloomy-richebacher-was-prescient-in-1999/

Links

If you have a few favorites, please let me know. 

                                                      -work in progress-

My Other Blogs

Un Inversor Inteligente www.uninversorinteligente.com (spanish)

Ferrer Invest www.ferrerinvest.com/un-inversor-inteligente.html (spanish)

Seeking Wisdom www.seekingworldlywisdom.tumblr.com

Value Investing Research

Magic Formula Investing www.magicformulainvesting.com

Outstanding Investor Digest www.oid.com

The Manual of Ideas www.manualofideas.com

Value Investors Club www.valueinvestorsclub.com

Value Investor Insight www.valueinvestorinsight.com

Value Line www.valueline.com

Value Investing Blogs

All Value Investing www.allvalueinvesting.com  Check out the videos!

Above Average Odds www.aboveaverageodds.com

The Brooklyn Investor: http://brooklyninvestor.blogspot.com/

Buffett FAQ www.buffettfaq.com

Fundoo Professor www.fundooprofessor.wordpress.com

Gannon and Hoang on Investing http://gannonandhoangoninvesting.com/

GrahamandDoddsville www.grahamanddoddsville.net

Greenbackd.com    www.greenbackd.com

Greg Speicher www.gregspeicher.com

Margin of Safety www.amarginofsafety.com

Mungerisms www.mungerisms.blogspot.com

The Inoculated Investor www.inoculatedinvestor.com

Simoleon Sense www.simoleonsense.com

Street Capitalist www.streetcapitalist.com

Value Investing World www.valueinvestingworld.com

ValueWalk www.valuewalk.com

Warren Buffett Resource www.warrenbuffettresource.wordpress.com

Value Investing Sites

Alphaclone www.alphaclone.com

Dataroma www.dataroma.com

Gurufocus www.gurufocus.com

Seeking Alpha www.seekingalpha.com

Value Investing Firms

Ariel Investments www.arielinvestments.com

Aquamarine www.aquamarinefund.com

Baron Funds www.baronfunds.com

Baupost www.baupost.com

Bestinver www.bestinver.es

Century Management www.centman.com

Clipper Fund www.clipperfund.com

Davis Funds www.davisfunds.com

Dreman Value Management www.dreman.com

Fairholme www.fairholmefunds.com

First Eagle Funds www.firsteaglefunds.com

First Pacific Advisors www.fpafunds.com

Formula Investing Funds www.formulainvestingfunds.com

GMO www.gmo.com

Greenlight Capital www.greenlightcapital.com

Himalaya Capital Management www.himalayacapital.com

Hummingbird Value Fund www.hummingbirdvalue.com

Longleaf Partners www.longleafpartners.com

Mackenzie Investments www.mackenziefinancial.com

Muhlenkamp & Co. www.muhlenkamp.com

Oakmark Funds www.oakmark.com

Oaktree Capital Management www.oaktreecapital.com

Olstein Funds www.olsteinfunds.com

Pabrai Investment Funds www.pabraifunds.com

Pzena Investment Management http://www.pzena.com

Redfield, Blonsky & Co. www.rbcpa.com

Sarbit www.sarbit.com

Sequoia www.sequoiafund.com

T2 Partners www.t2partnersllc.com

Third Avenue www.thirdavenuefunds.com

Third Point www.thirdpoint.com

Tweedy, Browne www.tweedy.com

Weitz Funds www.weitzfunds.com

Wintergreen Funds www.wintergreenfund.com

Value Investing Schools and Courses

Centro Enseñanza Online Manuel Ayau www.umayau.com  (spanish)

Columbia Business School www7.gsb.columbia.edu/valueinvesting

Gabelli School of Business www.fordham.edu/cba

Kellogg School Of Management www.bit.ly/zU5n3b

Management Development Institute www.sanjaybakshi.net

Richard Ivey School of Business www.bengrahaminvesting.ca

UC Davis Graduate School of Management www.bit.ly/xkUZ4v

Value Oriented Companies

Berkshire Hathaway www.berkshirehathaway.com

Fairfax Financial Holdings www.fairfax.ca

Notable Economists

Carlos Rodriguez Braun www.carlosrodriguezbraun.com  (spanish)

Jesús Huerta de Soto www.jesushuertadesoto.com  (spanish)

Juan Ramón Rallo www.juanramonrallo.com  (spanish)

Philipp Bagus www.philippbagus.com

Xavier Sala-i-Martín www.salaimartin.com

Amateur Portfolio Managers

Covestor www.covestor.com

Marketocrazy www.marketocracy.com

Unience www.unience.com (spanish)

Media and other resources

Farnam Street www.farnamstreetblog.com

Barking up the wrong tree www.bakadesuyo.com

Futile Finance www.futile.free.fr

Inteligencia y Libertad www.intelib.com  (spanish)

Libre Mercado www.libremercado.com  (spanish)

Grupo Retiro www.gruporetiro.com  (Family Business, spanish)

Michael Mauboussin www.michaelmauboussin.com

Santa Fe Institute www.santafe.edu

Libertarian Think Tanks

CATO Institute www.cato.org

Instituto Juan de Mariana www.juandemariana.org  (spanish)

Ludwig von Mises Institute www.mises.org

A reader suggests:

  1. Bronte Capital’s blog – John Hempton shares his thought process and interacts frequently with readers on the blog. (http://brontecapital.blogspot.com/)
  2. Distressed debt investing blog (http://www.distressed-debt-investing.com/)
  3. Corner of Berkshire and Fairfax forums (http://www.cornerofberkshireandfairfax.ca/forum/)                                 

Book Club for The Intelligent Investor; Can a Company Have Too Much Debt? Free Courses

POWER OFF

Book Club for Value Investors (Discussion) http://www.moderngraham.com/

Graham & Doddsville – Issue 20 – Winter 2014

Can a Firm Have Too Much Debt

1988a_bpea_bernanke_campbell_friedman_summers

Is There Too Much Corporate Debt_Bernankie 1988

The above papers were written during the LBO craze of the late 1980s which, in turn, was driven by the all-time low in asset values of the early 1980s.

Liquidation and Debt Capacity   Worth a read!

Free Course with Yale’s Schiller on Financial Markets and Risk:

https://class.coursera.org/financialmarkets-001

Argument Clinic

Valuation Classes for Beginners from Modern Graham

GURU Oct 23

http://www.moderngraham.com/?page_id=1766

READ, READ, READ

Books

A GREAT POST FOR INVESTORS 

http://wexboy.wordpress.com/2013/06/07/why-i-read/?blogsub=confirming#subscribe-blog

The immediate & obvious answer, as with most things in life, is ‘What else would I bloody do…?!‘ But I have to admit, I’m an autodidact – always have been, always will be, ever since childhood – which unfortunately made organized education increasingly intolerable** the older I got. However, when it comes to investing, the odds are stacked in my favour – organized education doesn’t offer you a hope in hell of becoming a good, let alone agreat, investor. As people often notice with regard to MBAs… [Again, I can't resist this classic!].